Ch 03 Supply Chain Drivers
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Transcript of Ch 03 Supply Chain Drivers
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 1/21
Chapter 3
Supply Chain Drivers
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 2/21
� Drivers of supply chain performance
� A framework for structuring drivers
� Facilities
� Inventory� Transportation
� Information
� Sourcing� Pricing
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 3/21
Drivers of Supply Chain
Performance� Facilities
± places where inventory is stored, assembled.
± production sites and storage sites
� Inventory
± raw materials, WIP, finished goods within a supply chain
± inventory policies
� Transportation
± moving inventory from point to point in a supply chain
± combinations of transportation modes and routes
� Information
± data and analysis regarding inventory, transportation, facilities throughout the
supply chain ± potentially the biggest driver of supply chain performance
� Sourcing
± functions a firm performs and functions that are outsourced
� Pricing
± Price associated with goods and services provided by a firm to the supply chain
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 5/21
Facilities
� Role in the supply chain
± the ³where´ of the supply chain
± manufacturing or storage (warehouses)� Role in the competitive strategy
± economies of scale (efficiency priority)
± larger number of smaller facilities (responsiveness
priority)
� Example 3.1: Toyota
� Components of facilities decisions
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 6/21
Components of Facilities Decisions� Location
± centralization (efficiency) vs. decentralization
(responsiveness)
± other factors to consider (e.g., proximity to customers)� Capacity (flexibility versus efficiency)
� Warehousing methodology (SKU storage, cross-docking)
� Overall trade-off: Responsiveness versus efficiency
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 7/21
Inventory: Role in the Supply
Chain
� Inventory exists because of a mismatch
between supply and demand
� Source of cost and influence on responsiveness
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 8/21
Inventory: Role in Competitive
Strategy
� If responsiveness is a strategic competitive
priority, a firm can locate larger amounts of
inventory closer to customers
� If cost is more important, inventory can be
reduced to make the firm more efficient
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 9/21
Components of Inventory
Decisions� Cycle inventory
± Average amount of inventory used to satisfy demand between shipments
± Depends on lot size
� Safety inventory
± inventory held in case demand exceeds expectations
± costs of carrying too much inventory versus cost of losing sales
� Seasonal inventory
± inventory built up to counter predictable variability in demand
± cost of carrying additional inventory versus cost of flexible production
� Overall trade-off: Responsiveness versus efficiency ± more inventory: greater responsiveness but greater cost
± less inventory: lower cost but lower responsiveness
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 10/21
Transportation: Role in
the Supply Chain
� Moves the product between stages in the
supply chain
� Impact on responsiveness and efficiency� Faster transportation allows greater
responsiveness but lower efficiency
� Also affects inventory and facilities
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 11/21
Transportation:
Role in the Competitive Strategy
� If responsiveness is a strategic competitive
priority, then faster transportation modes can
provide greater responsiveness to customers
who are willing to pay for it
� Can also use slower transportation modes for
customers whose priority is price (cost)
� Can also consider both inventory and
transportation to find the right balance
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 12/21
Components of
Transportation Decisions
� Mode of transportation:
± air, truck, rail, ship, pipeline, electronic
transportation
± vary in cost, speed, size of shipment, flexibility
� Route and network selection
± route: path along which a product is shipped
± network: collection of locations and routes
� In-house or outsource
� Overall trade-off: Responsiveness versus
efficiency
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 13/21
Information: Role in
the Supply Chain
� The connection between the various stages in
the supply chain ± allows coordination between
stages
� Crucial to daily operation of each stage in a
supply chain ± e.g., production scheduling,
inventory levels
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 14/21
Information:
Role in the Competitive Strategy
� Allows supply chain to become more efficient
and more responsive at the same time (reduces
the need for a trade-off)
� Information technology
� What information is most valuable?
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 15/21
Components of Information
Decisions
� Push (MRP) versus pull (demand information transmitted
quickly throughout the supply chain)
� Coordination and information sharing
� Forecasting and aggregate planning
� Enabling technologies
± EDI
± Internet ± ERP systems
± Supply Chain Management software
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 16/21
Sourcing: Role in
the Supply Chain
� Set of business processes required to purchase
goods and services in a supply chain
� Supplier selection, single vs. multiplesuppliers, contract negotiation
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 17/21
Sourcing:
Role in the Competitive Strategy
� Sourcing decisions are crucial because they
affect the level of efficiency and
responsiveness in a supply chain
� In-house vs. outsource decisions- improving
efficiency and responsiveness
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 18/21
Components of Sourcing
Decisions
� In-house versus outsource decisions
� Supplier evaluation and selection
� Procurement process� Overall trade-off: Increase the supply chain
profits
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 19/21
Pricing: Role in
the Supply Chain
� Pricing determines the amount to charge
customers in a supply chain
� Pricing strategies can be used to match demandand supply
8/7/2019 Ch 03 Supply Chain Drivers
http://slidepdf.com/reader/full/ch-03-supply-chain-drivers 20/21